PWSA line warranty program ruled illegal

Judge says the service is not permitted under state law

March 15, 2011 12:00 AM

By Joe Smydo Pittsburgh Post-Gazette

Pittsburgh Water and Sewer Authority's controversial line warranty program is not permitted under state law, an Allegheny County judge ruled Monday, providing another twist in a drama that's already included the abrupt resignation of the authority's executive director.

While the line warranty service "appears to be a good program for PWSA customers, it is not a program that is permitted under the Municipality Authorities Act," Common Pleas Court Judge R. Stanton Wettick Jr. said, ruling that the law prohibits the authority "from unnecessarily burdening or interfering with existing businesses."

The lawsuit against PWSA and Utility Line Security LLC was filed by Dominion Products and Services Inc. and the Manchester Group LLC, companies that provide their own line warranty programs.

While a setback for PWSA, Judge Wettick's ruling does not necessarily mean the end of the program.

PWSA solicitor Mark Nowak said he'll have to discuss the judge's ruling with the authority's board and get direction on how to proceed. An appeal is one possibility, he said, noting Utility Line, or ULS, also will be consulted.

Mr. Nowak said officials also have practical considerations to keep in mind, such as the fact that ULS is in the process of providing repairs to customers who have encountered line problems while in the program.

Antonino Legeza, attorney for the plaintiffs, could not immediately be reached for comment on the judge's ruling.

Dominion and Manchester contended that PWSA's program, which automatically enrolls customers unless they opt out, was unfair competition and illegal.

In 2009, the authority board awarded Utility Line a contract to operate the warranty program. Initially, customers had the option of enrolling. When few people signed up, the authority restructured the program so that customers were automatically enrolled at the rate of $5 a month unless they took steps to opt out.

The opt-out provision created a firestorm. Besides the Dominion and Manchester suit, PWSA faces a pair of class-action lawsuits from unhappy customers.

Robert Sommer, attorney for the customers, said he hadn't yet read the decision and wasn't prepared to comment. Mr. Sommer said the class-action suit will continue despite the judge's ruling.

Litigation hasn't been the only fallout of the line warranty program.

Michael Kenney resigned as PWSA's executive director in December amid an investigation into his personal and professional ties to Utility Line and two other companies that have some overlap in ownership.

Judge Wettick ruled the program was illegal even though he said he believed that customers would receive better insurance at less cost through the PWSA program than they would through other companies.

The authority argued that the program did not conflict with the Municipality Authorities Act because ULS, a private company, was providing the service. Judge Wettick disagreed with that assertion, saying the program "was created and is operated by PWSA."

Dominion and Manchester also argued that the PWSA's opt-out program violated a city ordinance against negative option billing. Judge Wettick disagreed.